Wednesday, June 17, 2009

Mortgage Rates Up: Ask Yourself Why?



"Mortgage applications in the U.S. fell last week to the lowest level since November as a jump in borrowing costs discouraged refinancing and threatened to deepen the housing slump.

The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan dropped 16 percent to 514.4 in the week ended June 12, from 611 the prior week. The group’s refinancing gauge declined 23 percent, while the purchase index fell 3.5 percent."

To read the rest of the article from Bloomberg, click here.

So why are mortgage rates rising? HINT: Look at the chart above.

The answer to today's quiz is simple. Inflation fears based on excessive government spending. The U.S. government will have over a ONE TRILLION DOLLAR DEFICIT JUST THIS FISCAL YEAR.

That's $1,000,000,000,000. Lots of zeros, even for Washington.

That's not just total Federal spending---which would be large enough. That's the portion of the budget the government is going to borrow and finance with you (YOU!!!) paying the interest.

No wonder mortgage rates are rising and will continue to rise for some time to come. The trend is definitely up no matter what the Fed does. The reason is simple. Bankers aren't going to loan money on 30-year notes at current low rates. This is how they got burned in the 1970s. Borrowing short and lending long.

Sorry Uncle Sam. Not again.

Robert J. Abalos, Esq.